I , 

%-HE .iiTl?ORNEY GENERAL 

OF TEXAS 

Honorable C. D. Simmons 

Comptroller, University of Texas 

Austtn, Texas 

Dear SLr: Opinion No. O-5393 

Re: Interpreta'cIon of S.B. 287, Acts 

1943, Regular Session, Fortgeighth Legislature. 

We are in receipt of your opinion request reading 

in part as follows: 

"The Board of Regents of the University of 

Texas has directed me to request of you an opinion 

as to your interpretation of Senate Bill No. 287, 

Acts Regular Session, 48th. Legislature. 

"The board of Regents particularly desires 

your interpretation of the effect and meaning of 

the language of the Bill which reads as follows: 

"'The Board of Regents of the Unlverslty and 

the Commissioner of the General Land Office, In 

considering an application for an extension or renewal of any such lease above described, shall take 

into consideration in establishing the conslderation for such lease the diligence with which the 

lessee has followed his duties under the existing 

lease, the present value of the land upon which an 

extenslon or renewal of the lease Is sought, and 

all other good business practices.'" 

S. B. 287, Acts 1943, Regular Session, 48th. Leglslature, which now appears as Article 53416 of Vernon's Annotated Civil Statutes, reads as follows: 

"Section 1. In the case of any nonproducing 

oil, gas or mineral lease on University land, if 

one hundred twenty (120) days before expiration of 

the primary term there be In effect any restrictions 

issued by a Federal war agency prohlblt1ng the drilling or completion of a well thereon, the holder of 

such lease shall have the right to negotiate an extension or renewal of such lease for a perlod of not 
Hon. C. D. Simmons, page 2 o-5393 

/ 

longer then two (2) years with the Board of Regents 

of the Unlverslty of Texas and the Commlssloner of 

the Qeneral Land Office. 

“The Board of Regents of the %lversltg of 

Texas and the Commlssloner of the Qeneral Land Offlee, in 0onslderUg an appllcatlon for an extension or renewal of any suoh lease above desorlbed, 

shell take lnto oondlderatton ln establishing the 

oonslderatlon for suah lease the dlllgenoe with 

which the lessee has followed his duties under the 

existing lease, the present value of the lend upon 

which an extension or renewal of the lease Is sought, 

and all other good business practloes. The lessee 

In presentlng his applloatlon for extenslon or renewal of such lease or leases shall present evidence ’ 

to the Board of Regents of the University of Texas 

and to the Commlssloner of the ffeneral Land Office 

showlng it was lmposslble for hlm or any of his ooowners to comply with the restrlctlons whloh he 

claims prohlblted the drilling or oompletlon of the 

well on said tract. “If the lessee should claim es grounds for an 

extenslon or renewal of any such lease that there 

Is fnsuffiolent acreage wlthln the tract under lease 

by him to comply with the Federal reatrlotlon then 

no extension or renewal shall be granted unless said 

leases also show that there la no adjacent and adjoining acreage to sald traot whereln said eppllcant 

is a party in lntereat that could have been combined 

wtth the tract upon whloh the applloatlon for extenslon or renewal Is made ln order to oomplg wlth the 

Feclerel restriction. “Sec. 2. The Commlssloner of the General Land 

Office 1s hereby euthorieed to Issue to the lease 

owner such instrument In writing in the nature of an 

extension or renewal of such lease as may be necessary or proper to carry into effect the foregoing 

provlsion of this Aot. “Sec. 3. The provlslons of this Act are and 

shall be held and oonstrued to be oumuletlve of all 

General Laws of thls state on the subject treated of 

and embraced ln thls Act when not ln oonfllot herewlth, but ln oane of oonfllot, ln whole or In part, 

this Aot shell control. 

"960. 4. If any seotlon, subdlvlslon, para- 
Hon. C. D. Simmons, page 3 o-5393 

graph, sentence, or clause of this Act be held 

to be unconstitutional, the remaining portions of 

same shall nevertheless be held valid and binding 

"Sec. 5. The fact that certain leases on 

University lands are of such size or shape as to 

create the probability that they cannot be developed under governmental restrictions on 011 developments, creates an emergency and Imperative public 

necessity demanding the suspenslon of the Rule requlring bills to be read on three several days, and 

sa1d Rule is hereby suspended, and this Act shall 

take effect and be in force from and after its 

passage, and it is so enacted." 

It is our opinion that 3. B. 287 gives to a lessee 

of University land, who brings himself wIthin Its terms, the 

right to a refusal of an extension or renewal of his lease 

for such term as the Regents and the Land Commissioner may 

fix (not to exceed two years) and upon a consideration to be 

determined by them. The word "shall" is used in the first 

paragraph of S. B, 287 ln connection with the granting of a 

benefit or a right. Under such circumstances the meaning is 

held to be mandatory rather than permissive. 39 Tex. Jur. 

37. In other words the Regents and the Land Comm%ssloner may 

make an extension or renewal with present lessees of University lands, who come within the terms of the Act, wIthout the 

necessity of a public sale and competitive bidding as provided 

for by Article 2603a, Vernon's Annotated Civil Statutes. 

The Act gives the Board of Regents and the Land Commissioner broad discretion in the matter of fixing a consideration. The Act makes no provision for an appeal from the 

action of the Regents and the Land Commissioner. Their action 

in fixing a consideration would be, in our opinion, final unless an interested party were able to show a clear case of an 

abuse of discretion on their part. Securities State Bank of 

San Juan v. State, 169 S. W. 2nd. 554, refused for want of 

merit. However, the Regents and the Land Commissioner would 

not be authorized to discriminate between lessees similarly 

situated, either in regard to the consideration or the period 

of their extension or revewal. 

139 Tex. 66, 161 S. W. (2) 1022. 

Railroad Commission v. Shell, 

The next question is whether or not Section 5, Article 2603a, Vernon's Annotated Civil Statutes, which provides 

for a bonus, a royalty of l/8 of gross production and a delay 

rental of lO# per acre per year, applies to an extension or 

renewal under S. B. 287. Article 2603a by its terms applies 

to a sale at public auctton on competitive bids. The sale 
Hon. C. D. Simmons, page 4 o-5393 

must be held by the Board for Lease of University Lands, which 

Board consists of two members of the Board of Regents and~the 

Land Commissioner. Article 26C3a, Sec. 1, Vernon's Annotated 

Civil Statutes. Senate Bill 287, on the other hand, authorizes the entlre Board of Regents and the Land Commissioner to 

grant an extension or renewal to present lessees for a limlted period without competitive bids. The provlslon In Art. 

26C3a, Sec. 5 for assessing the highest bidder a special fee 

of one (1%) percent of the total sum bid to pay the expenses 

of the sale, including the fee of the auctioneer crying the 

sale, would clearly not apply to an extension or renewal under 

3. B. 287. The fact that the lessee's right to invoke the 

provisions of 3. B. 287 is condltioned on a showing that he 

has been unable because of Federal restrictions to enjoy the 

drilling rights which his lease confers, lndfcates to our 

mind an intention to give such a lessee a further opportunity 

for enjoying such rights without penalty. We take the view 

that 3. B. 287 was intended to stand In place of performance 

for a maximum period of two years, Lf the Board of Regents 

and the Land Commissioner should, in their good judgment, determine that a lessee of University land Is entitled to invoke Its provisions and is deserving of its benefits. 

The common law recognizes a doctrine of implled intention by which certain klnas of contracts ar,e suspended because of temporary impossibility of performance artsing after 

the date of execution and without fault of the partles. 

The general rule is epitomized in the Restatement 

on Contracts, Sec. 462, as follows: 

"Temporary imposslbillty of such character 

that if permanent it would discharge a promiser's 

entire contractural duty, has that operation if 

rendering performance after the impossibility 

ceases would Impose a burden on the promisor substantially greater than would have been imposed 

upon him had there been no impossibility; but otherwise such temporary impossibility suspends the 

duty of the promlsor to render the p;rformance promised 

only while the impossibility exists. 

(Rev. 

See, also Vol. 6, Williston on Contracts 

Ed. 19383 Sec. 1957; 17 C.J.S. 954, 956. 

We do not here hold that such rule obtains in Texas, 

as we do not think that such a determination is necessary 

in order to answer your question. However, we do belleve that 

the Legislature in enacting 3. B. 287 had In mind the equitable 

claims arising from the plight of a lessee who is unable to 
Hon. C. D. Simmons, page 5 o-5393 

reap the fruits of his lease because of a Federal ruling and 

these are the same considerations that underlie the common 

law doctrine just mentioned. Upon a consideration of the 

special circumstances under whleh 3. B. 287 becomes operative 

and in view of the objects of the Act, we are of the opinion 

that the Act is complete within itself and that the provisions of Article 2603a, requiring a minimum consideration 

for leases let at public auction do not apply. 

We do not think that your question involves a aetermination of the rights of lessees of University land under 

Sec. 7, Title III of the Second War Powers Act, approved 

March 27, 1942. That section provides: 

“(7) No person shall be held liable for 

damages or penalties for any default under any contract or order which shall result directly or lndirectly from compliance with this subsection (a) 

or any rule, regulation, or order issued thereunder, notwithstanding that any such rule, regulation or order shall thereafter be declared by judicial or other competent authority to be invalid." 

U. 3. Cong. Service Code (1942) 247; Tit. 50, U.S.C.A. 

APP. Sec. 633 (7). 

Subsection (a) which is referred to in the above 

quotation is the section conferring priority powers on the 

President. This section is the present source of authority 

for Conservation Order No. M-68 as amended (8 F.R. 104) and . 

Preference Rating Order No. P-98, as amended (7 F.R. 2719). 

These orders, by prescribing conditions under which priority 

directives on strategic materials are held not to apply, ~111 

have the effect of rendering temporarily Impossible the performance by some lessees of the drilling provisions under 

existing University leases. 

It is expressly provided In Sec. 1501, Title XV of 

the Second War Powers Act, 1942 (U.S. Cong. Service Code, 253; 

Tit. 50 U.S.C.A. App. Sec. 645) that Title III of that Act, 

which -includes Sec. 7, above quoted, "shall remain in force 

only until December 31, 1944, or until such earlier time as 

Congress by concurrent resolution, or the President, may designate." 

We are familiar with the rule which gives Federal 

legislation precedence over other State statutes where Congress 

has legislated in regard to a subject which is within i,ts constitutional control and over which it has the right to assume 

exclusive jurisdiction and has manifested its intentionto 

deal therewith in full. 11 Am. Jur. 307; 17 R.C.L. 694; 
, . 

Hon. C. D. Simmons, page 6 o-5393 

Neville v. G. C. & 3. F. Ry. Co. (Corn. App.) 252 S.W. 483. 

Rbw ever, in our opinion, Sec. 7 of Title III of the Second 

War Powers Act, 1942, Is by Its terms operative only to the 

extent of absolving a lessee from liability "for damages or 

penalties for any default." Such Fs the general rule with 

reference to contracts under which performance is rendered 

illegal or impossible because of conditions occurring subsequent to the date of their execution. Cinquegrano v. T.A. 

Clarke Motors(R.D.) 30 A(2d) 859; Scanti v. American Auto 

Supply co., 36 N. Y. 3. (2d) 747; 20 Texas Law Review, 710. 

The contrary rule seems to have been adopted ln Texas where 

the impossibility in performance resulted from the adoptlon 

of prohibltlon under the Local Option Statute. Houston Ice 

& Brewing Co. v. Keenan (1905) 99 Tex. 79, 88 S.W. 197. The 

right to a suspension of contracts during the period of temporary impossibility does not deem to be covered by the Feaera1 Act above quoted. The Federal Act merely says that 

"no person shall be held liable for damages or penalties for 

any default under any contract" etc. After the expiration of 

the primary term in a standard 011 and gas lease, if the delay rentals have been paid and no well has been drilled, the 

obllgatlons of the lessee are ordinarily at an end. Failure 

to drill during the primary term is not a "default" unless 

the absolute form of drillfng clause Is employed. 31 Tex. 

Jur. 740. This Is not the form of lease which the statute 

(Art. 2603a, Sec. 5, Vernon's Ann. Clv. St.) authorizes the 

Board for Lease of University Lands to make, nor the lease 

provided for in your Form No. 4. See our Opinion No. O-493, 

issued on March 15, 1939, to Mr. Leo C. Haynes, Secretary of 

the Board of Regents. We are not here concerned with whether 

lessees of University lands have common law rights independent of the Federal statute to a suspension of their lease 

agreements for such period as the enjoyment of the drilling 

rights thereunder may have been rendered illegal or impossible 

as a result of compliance with a rule, regulation or order of 

a Federal War Agency. Our holding is that S.B. 287 is not 

rendered inoperative, either by reason of the Federal statute 

or by reason of the lessee's common law rights. It clearly 

gives a lessee of University lands, who comes within its 

terms, a right to something he did not have before, viz. the 

refusal on a present extension or renewal for a fIxed period 

beyond the primary term of his lease. 

Trusting that the foregoIng sufflclently answers 

your inquiry, we are 
, . 

Hon. C. D. Simmons, page 7 0 -5393 

Yours very truly 

ATTORNEY GENERAL OF TEXAS 

By sbagan Dickson 

Fagan DLckbon 

Assistant 

FD:BT:wc 

APPROVED JUNE 24, 1943 

s/Grover Sellers 

FIRST ASSISTANT 

ATTORNEY GENERAL 

Approved Opinion Committee By s/BWB Chairman